In the last couple of years, there has been increasing focus on the use of credit checks of job applicants by employers. In August, Illinois Gov. Quinn signed House Bill 4658 (pdf), which creates the Employee Credit Privacy Act. The law bans employers from checking the credit of job applicants, with some exceptions. In October, the Wall Street Journal reported on how new types of credit scores can affect individuals’ privacy. In March 2011, the Oregon governor signed a law that protects job applicants’ privacy when it comes to their credit reports.
Now, USA Today looks at the issue of whether it’s fair for employers to use credit reports to screen job applicants.
Seven states — California, Connecticut, Hawaii, Illinois, Maryland, Oregon and Washington — have recently restricted the practice, according to the National Conference of State Legislatures, and now, Colorado lawmakers are considering a similar measure. The laws generally contain exemptions for some positions, such as those responsible for handling large amounts of cash. […]
A 2010 study by the Society for Human Resource Management concluded that employers aren’t using credit reports to pre-screen large employee pools, and found that only 9% of employers saw a good credit report as one of the most important factors in hiring, behind more important factors such as experience, specific skills and a favorable interview. […]
But state lawmakers across the country argue the federal law doesn’t go far enough in protecting the growing number of people with bad credit, and Carroll worries that employers may be creating a permanently unemployable class of people by considering credit reports in hiring.
California lawmakers late last year passed one of these laws over the objection of a coalition of business interests, including the National Federation of Independent Business (NFIB), which argued that small employers need every tool they can use to make smart hiring decisions. […]
[Chris Ball, operations manager for the Jackson, Miss., branch of Express Employment Professionals,] says he understands that hiring managers who use credit reports are trying to protect their companies from people who might be “desperate” and turn to embezzlement or theft to cover their bills. But he says he’s not sure that using credit reports is all that useful: “In this day and age, it’s hard to find anyone with perfect credit.”